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As the AI-led rally pushes stock valuations higher, value-conscious investors seek underappreciated stocks for steady income and stock price appreciation opportunities. The Madison Dividend Income Fund, in its first quarter report, said that it believes dividend stocks will rebound amid a broader sector leadership change in the market observed during the quarter, with Energy, Industrials and Financials pocketing significant gains. The valuation of dividend stocks is another reason behind the fund’s optimism, as it cited data from Bank of America (BofA) Global Research, which says some dividend funds are “historically cheap” compared with the S&P 500.
Many other notable Wall Street analysts are recommending dividend stocks in the current volatile environment. Talking to CNBC in April, JoAnne Feeney, Partner and Portfolio Manager at Advisors Capital Management, recommended investors to pile into “good” companies that pay dividends and keep their eyes “firmly on the long run.” The analyst thinks dividend stocks help investors navigate through cyclical volatility.
In this backdrop, let’s examine some top high-yield dividend stocks that also have upside potential in terms of stock price. Based on the average target price set by Wall Street analysts, we preferred stocks with at least a 4% dividend yield and 20% upside potential.
Vale SA
One-Year Average Analyst Price Target: $15.74
Upside Potential: 40%
Brazilian metals and mining company Vale SA (NYSE:VALE) is one of the notable high-yield dividend stocks with upside potential. The stock’s dividend yield touched 11% as of June 18 as Vale shares fell 28% so far this year, driven by volatility in iron ore and copper prices after fresh data from China raised concerns about economic recovery in the country. In May, UBS upgraded the stock to Buy from Neutral and increased its price target to $15 from $13. UBS believes the ESG risks dragging down the stock are set to “moderate” as the firm believes the overall risk-reward for the company has also improved.
Wall Street analysts have an average price target of $15.74 for Vale, which presents a 40% upside potential from the stock price as of June 18.
BP PLC
One-Year Average Analyst Price Target: $43.30
Upside Potential: 22.35%
British oil giant BP PLC (NYSE:BP) was in the news after Citi called the company a potential “standard-bearer” in Europe’s future energy policy following European Union parliamentary elections which saw right-wing leaders gaining ground. BP has a dividend yield of about 4.9%. In May, BP reported weak Q1 results and expects upstream production in the second quarter to be slightly lower than in the first quarter.
According to data from Yahoo Finance, Wall Street has a $43.30 price target on BP, which shows a 22.35% upside from the stock’s current levels.
KeyCorp
One-Year Average Analyst Price Target: $16.44
Upside Potential: 21%
With a 6% yield and 14 consecutive years of dividend growth, Cleveland, Ohio-based banking company KeyCorp (NYSE:KEY) is one of the noteworthy high-yield dividend stocks with over 20% upside potential.
Wall Street analysts on average expect the stock to hit $16.44 over the next 12 months, which is about 21% higher than the stock price on June 18. In April, the regional bank posted first quarter results that came in weak amid rising expenses and a decline in net interest income. Adjusted EPS from continuing operations came in at $0.22, missing the $0.23 consensus.
KeyCorp shares were trading at $13.59 as of June 18, while Wall Street analysts have an average price target of $16.44 on the stock, representing a 21% upside.
Rio Tinto
One-Year Average Analyst Price Target: $81.38
Upside Potential: 23%
Mining giant Rio Tinto PLC ADR Common Stock (NYSE:RIO) pays dividends semiannually and has a yield of over 6.5% as of June 18, one of the highest among peers in the mining industry. In April, the company said its iron-ore shipments fell 10% quarter-over-quarter. However, the company maintained its annual shipment guidance of 323 million to 338 million metric tons for the full year.
Wall Street analysts have an average price estimate of $81.38 for Rio Tinto, which represents a 23% upside from the stock’s price as of the June 18 market close.
UGI Corporation
One-Year Average Analyst Price Target: $30.67
Upside Potential: 39%
Pennsylvania-based natural gas and power distribution company UGI Corp. (NYSE:UGI) has been paying dividends for the last 140 years and, as of 2023, increased its payouts for 36 consecutive years. The stock has a 6.7% dividend yield as of June 18. In the second quarter, the company’s adjusted EPS came in at $1.97, beating estimates by $0.33, while revenue fell 20.3% year over year to $2.47 billion, missing the consensus by $600 million. The company affirmed its 2024 adjusted EPS outlook range of $2.70 to $3. Based on this EPS outlook, the company’s payout ratio of under 50% makes the dividend safe.
According to data compiled by Yahoo Finance, Wall Street analysts expect the stock price to reach about $31 over the next 12 months on average. This estimate represents a 39% upside from the current price.
Are You Missing Out On Higher Yields?
The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider.
For instance, Basecamp Alpine Notes offers a target APY of 9% with a term of only three months, making it a powerful short-term cash management tool with incredible flexibility. EquityMultiple has issued 61 Alpine Notes Series and has met all payment and funding obligations with no missed or late interest payments. With a low minimum investment of just $1,000, Basecamp Alpine Notes makes it easier than ever to start building a high-yield portfolio.
Don’t miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga’s favorite high-yield offerings.
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This article 5 High-Yield Dividend Stocks With Over 20% Upside Potential originally appeared on Benzinga.com
